CEO spotlights on IP biz as Synopsys tops estimates

SAN FRANCISCOEDA and IP vendor Synopsys Inc. Wednesday (May 19) reported revenue gains on a sequential and year-over-year basis for the three months ended April 30, as the company beat consensus analyst expectations for revenue and profit for the period.

Aart de Geus, Snynopsys Chairman and CEO, said while the company's core EDA business remains healthy, Synopsys' more recently established IP business made particular progress last quarter and is approaching a $200 million annual run rate.

"This is not your grandmother's EDA company," said de Geus, noting that Synopsys has essentially built its IP offerings from zero over a period of about 10 years. "We are the key IP partner to many companies today and I expect it to continue to be a growing business for us."

Synopsys (Mountain View, Calif.) reported sales for its fiscal second quarter of $338.1 million, up about 2 percent from the prior quarter and up nominally from $336.8 million in the year-ago quarter.

The company posted a net income based on generally accepted accounting principles (GAAP) of $39.2 million, down 78 percent from the previous quarter, which included a one-time tax benefit of $91.6 million thanks to a settlement with the U.S. Internal Revenue Service. The fiscal second quarter GAAP net income was down 19 percent compared with the year ago quarter.

On a non-GAAP basis, excluding charges, Synopsys posted a fiscal second quarter net income of $61.9 million, or 41 cents per share, down from a non-GAAP net income of $65.9 million, or 45 cents per share, in the second quarter of fiscal 2009.

Analysts had expected Synopsys to report revenue for the fiscal second quarter of about $334.4 million, with non-GAAP earnings per share of about 40 cents, according to Yahoo Finance.

For the fiscal third quarter, Synopsys said it expects to post revenue of between $330 million and $338 million, with non-GAAP earnings per share of between 36 and 38 cents. For fiscal 2010, Synopsys expects to record revenue of between $1.34 billion and $1.36 billion and non-GAAP earnings per share of $1.52 to $1.62, a slightly narrower range than the company gave after the fiscal first quarter.

Asked if the fact that the top end of fiscal third quarter guidance was about flat with fiscal second quarter revenue was due to seasonal cyclicality de Geus said that while revenue would always be a little up or down from one quarter to the next, Synopsys is one of the least cyclical companies in the world, partially due to its ratable recognition model.

De Gues noted that the customer backdrop for EDA and IP companies remains cautious, primarily due to lingering global macroeconomic uncertainty. He said the unfolding upturn could further benefit Synopys' IP business.

"In downturns, customers rightly squeeze the costs out of everything," de Geus said. "When the upturn comes, they don't un-squeeze. They say ,'If there is more money, let's put it in new areas for differentiation.' "